Pension funds should be less nervous about taking investment risks, Andrew Griffith, economic secretary to the Treasury and City Minister, told the PLSA Investment Conference 2023 in Edinburgh this week.

In a pre-recorded message to conference attendees, Griffith said he wanted to reshape “risk averse culture”.

He said: “I want us to be positive about taking risks and to celebrate successful risk takers and also to recognise that without changes, there is risk in the system.

“We’re taking risks through risking low returns, poorer pensions under a weaker economy. But it’s all of you here who have the best understanding of risks and challenges with pension schemes and you can help us out reshape that risk-averse culture.”

Griffith’s comments come amid government’s ambitions to encourage pensions schemes to invest in illiquid assets, sustainable assets and UK growth.

However, in a panel session that followed Griffith’s pre-recorded message, Rachel Brothwood, executive director of pensions at West Midlands Pension Fund, criticised the government for lack of clarity and consistency.

She pointed out that in the past few years the industry had been asked to invest in infrastructure, to invest in levelling up, and now to invest in UK growth companies, including startups.

She said: “None of that has been particularly well defined, It’s all open to interpretation.”

She said the industry needs “clarity and consistency” around policy objectives, adding that different asset classes, different sectors, require different levels of expertise and different delivery modes with a fresh look at risk and return.

She said: “From an asset allocation perspective, it’s really challenging to see how this fits into a wider portfolio.”

She did, however, acknowledge that there are some “good examples throughout the UK where Local Government Pension Scheme (LGPS) funds and investment pools have managed to achieve this – whether through place-based investments, partnerships with universities, backing SMEs and providing debt and equity finance. It is possible, but on a small scale, she said.

“There should be opportunities for investors that are attractive to the UK but to enable us to better explore these and have certainty that it’s worth allocating the resources and the time to do it, we do need that stability and we need to be adequately backed by the government to ensure that the downside risks are protected for the long-term benefit of our members,” Brothwood said.

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